Brookfield Infrastructure Partners (BIP), together with its institutional partners, has entered into a definitive agreement to acquire Colonial Enterprises for an enterprise value of nearly $9bn or 9x EBITDA.
Colonial operates independently and fully owns Colonial Pipeline Company (CPC), which provides transportation services for oil products from the US Gulf Coast to the Atlantic Seaboard, as well as Colonial Marketing Company.
Colonial’s pipeline network stretches around 5,500 miles, extending from Houston, Texas, to the port of New York. The system is responsible for the transportation of 100 million gallons of various fuel types every day.
The transaction, slated to close in the second half of this year after meeting customary conditions, will enhance Brookfield’s midstream asset portfolio.
BIP’s equity investment at the closing is projected to be $500m, around 15% of the total equity investment, funded by proceeds from recent capital recycling initiatives.
Colonial is owned by five partners- Shell Midstream Operating (16.125%), Koch Capital Investments Company (28.088%); KKR-Keats Pipeline Investors (23.443%); Caisse de dépôt et placement du Québec (16.549%); and IFM Investors (15.795%).
In a separate statement, Shell Midstream Operating, a Shell subsidiary, also announced the sale of its stake to Colossus AcquireCo, a wholly owned subsidiary of Brookfield Infrastructure Partners. Shell’s stake in Colonial Enterprises has been valued at $1.45bn, which includes around $500m in non-recourse debt.
Shell Trading & Supply president Andrew Smith said: “This divestment reflects our focus on performance, discipline and simplification.
“It will allow us to concentrate on areas where we have scale and competitive advantage.”
Brookfield Infrastructure has engaged Jefferies, Greenhill & Co, a Mizuho affiliate, and Morgan Stanley & Co as joint financial advisors. Legal counsel for the transaction is provided by Kirkland & Ellis.
